What Will a Governor Newsom Mean for California Employers?

Benjamin M. Ebbink, Of Counsel with Fisher Phillips in Sacramento (Photo: Courtesy photo)

While much of the attention this midterm election has been focused on Congress and federal issues—the “blue wave” and a “referendum” on the Trump presidency—California employers know all too well that employment and labor policy is largely being driven at the state and local level. The split in Congress between the Republican-led Senate and the Democrat-controlled House means that we can expect continued gridlock and lack of significant federal legislation on employment issues actually being enacted into law.

Here in California, though, we have a new governor-elect in the form of former Lieutenant Governor and former San Francisco Mayor Gavin Newsom. Continued overwhelming Democrat super-majorities in both the State Senate and the State Assembly will help ensure that labor and worker advocates will have little trouble getting measures through the legislature and onto the new governor’s desk.

What will this new administration mean for California employers—more of the same, or a fresh voice? It’s pretty clear that labor will continue to have a friendly voice in the governor’s office in Sacramento, so we’re not looking at monumental change on the horizon. But previous comments and campaign statements by Newsom may shed some light on the course he may forge on labor and employment issues once he officially takes office.

Business Owner Background

Many employers have noted with hope that Newsom comes from a business background, developing a winery business into a growing empire with a number of restaurants, wineries, and other similar establishments. That has led some to speculate that he may intuitively understand some of the issues facing business owners in California, from bureaucratic red tape to a hostile litigation environment.

Like most politicians, Newsom voiced his support on the campaign trail for small businesses. His campaign website stated, “California’s small businesses provide half of all jobs in the state. Gavin is committed to fostering entrepreneurship, cutting red tape and expanding access to capital, particularly for minority and women-owned enterprises.”

Whether that translates into a better business environment for small businesses remains to be seen. After all, what politician has not expressed support for small businesses during their campaign? But some employers cling to the hope that, as an entrepreneur himself, Governor Newsom may be more receptive to certain concerns of the employer community.

It’s All About Dynamex

By far the most significant and pressing concern Governor Newsom will have to deal with is the continued fallout from the blockbuster decision by the California Supreme Court in the Dynamex case, where the court adopted an entirely new test for determining whether an individual is an employee or an independent contractor. This new legal standard, known as the “ABC Test,” makes it more difficult for businesses to utilize independent contractors and threatens to upend entire industries in our state.

There was an attempt late in the year by the business community to come up with a legislative solution to some of the difficulties created by this new standard, but that effort fizzled when legislative leadership announced there would be no discussion of the issue. But this issue has not gone away.

If anything, in fact, the angst and concern in the employer community has only intensified in recent months. Therefore, it’s likely that the number one issue from the business community will be to seek to address the impact of the Dynamex decision. There are likely to be numerous bills on the matter—from industry-specific bills to more comprehensive solutions. All of this means Governor Newsom will be forced to deal with Dynamex one way or another in 2019, whether he likes it or not!

Vetoed Bills and Arbitration Redux

It’s also likely that labor and worker advocates will put Newsom right to the test by putting many of the bills vetoed in recent years by Governor Brown right back on his desk. Foremost among these is the controversial ban on mandatory arbitration agreements in employment, which Governor Brown vetoed twice, most recently just a few short weeks ago, despite a strong boost by the #MeToo movement in 2018.

In fact, a good exercise in preparing for what may be coming down the pike is to review the significant employment measures vetoed by Governor Brown in recent years. As a former famous California governor liked to say, “They’ll be back!”

#MeToo and Sexual Harassment Legislation

Speaking of the #MeToo movement, while several large pieces of legislation were signed last year, a number of #MeToo priority bills were vetoed in 2018. These bills (and new sexual harassment-related proposals) are likely to be back as well.

Newsom has been a staunch advocate of the #MeToo movement. His website states, “As Governor, he will institute accountability measures across state government, and support strengthening workplace protections such as creating hotlines for victims, transparent, independent, swift investigations, and real consequences for abusers and harassers.”

In addition, future First Lady of California Jennifer Siebel Newsom has been an outspoken advocate of the #MeToo movement in her own right. Therefore, California employers can expect the legislative focus on sexual harassment legislation to continue, and for many of those measure to find a receptive audience in the new governor.

Gender Pay Equality

On a related front, California’s focus on addressing the gender pay gap is also likely to continue under the new administration. In recent years, California has enacted some of the strongest laws in the country designed to address gender pay inequality—from strengthening the state’s equal pay laws to prohibiting salary history inquiries to mandating female corporate board members.

Newsom has publicly stated that he will work to continue to address this issue, especially the wage gap for women of color. California employers can expect to see more legislative and regulatory efforts to address this issue under the new administration.

Gig Economy and the Future of Work

One of the more fascinating issues to watch will be Governor-elect Newsom’s approach to the “gig economy” and the ever-popular topic of the “future of work.” Hailing from San Francisco (and its nearby Silicon Valley), Newsom has groomed his image as someone who is hip and appreciates innovation and new technology. That may put him at odds with his friends in labor who are increasingly ramping up efforts to minimize potential job loss and other changes to the workplace.

Newsom had an extended section of his campaign website dedicated to the “future of work” which expressed support for concepts such as “wage insurance” (reemployment insurance for individuals who lose their jobs to automation) and “portable benefits” for gig economy workers.

Issues like “portable benefits” and “wage insurance” are hot buzzwords. Whether they translate into public policy proposals that the new governor actually gets behind and delivers remains to be seen.

Conclusion

Clearly, it’s pretty early to predict what the election of Gavin Newsom means for California employers. The foregoing represents our best predictions based on previous statements made by Newsom and other hints dropped along the way. Politicians say a lot of things, however, so only time will tell.

Some employers fear Newsom will be more liberal than his predecessor, and will enact even more draconian and burdensome policies. Others hold out hope that, based on his entrepreneurial experience and avowed appreciation for innovation, he could represent a fresh voice—especially on issues related to employee classification, the gig economy, and the future of work.

Benjamin M. Ebbink is of counsel with Fisher Phillips in Sacramento, Calif. He may be reached at bebbink@fisherphillips.com.